State College businesses hit by 2-year downturn

Economy and fallout of Sandusky scandal among the culprits

November 16, 2013 11:36 PM

Pedestrians make their way through the intersection of South Allen Street and College Avenue in downtown State College.

By Mark Dent / Pittsburgh Post-Gazette

STATE COLLEGE -- For decades, Terry Losch has kept track of his sales on an old quadrille pad. He owns Rapid Transit Sports, a charming sporting goods store across from campus in the center of downtown that sells Penn State gear, sporting equipment and about any type of athletic shoe you'd ever want.

His numbers are so detailed -- he even records weather patterns -- it takes only a few seconds for him to examine his data from football weekends and tell you about a bothersome trend. Sales the past two years on these important weekends are down by about 20 percent, compared with Rapid Transit's sales from 2001 to 2011.

"It's been a major impact," Mr. Losch said.

The past two years have not been easy for businesses in State College. Based on an analysis of business listings from the Downtown State College Improvement District, nearly 25 percent more downtown businesses have closed in 2012 and 2013 than in the two previous years, and several business owners spoke of declining sales.

While it's hard to assign general blame for these figures, owners pointed foremost to the recession the country is still recovering from -- and then to a problem that has exacerbated the situation: the football weekends. Once guaranteed to propel hotels, restaurants and stores through lean times, they have been damaged by a controversial seat licensing program and the aftermath of the Jerry Sandusky scandal.

"Call it what you will," said Jan Sawhney, owner of Reflections, a gift shop on Calder Avenue. "I'll call it collateral damage."

Other college towns depend on their respective university but often have tourists or commuters from nearby big cities to supplement their economy. State College is different. It's isolated. The nearest metro with a population above 1 million is Pittsburgh, more than 130 miles away; the winding roads and steep grades make the drive seem longer. This town grew as football grew and still requires football for sustenance.

Doug Kifolo, who owned the recently closed ice cream and sandwich shop Happy Valley Freez, said the downtown State College economy thrives on 10 to 12 weekends per year where it can expect business to double or triple from an ordinary weekend: "State" Patty's Day in the late winter, the Blue-White weekend in the spring, Arts Fest in the summer and the seven or eight football weekends in the fall.

Crowds for home football games have decreased significantly the past two years. In 2012, Penn State University averaged 96,730 fans per game, its lowest attendance since the stadium was expanded to fit nearly 107,000 in 2001.

The 96,000 average was 4.6 percent below the 2011 average and 11.2 percent below the stadium's average from five years before. Except for the sold-out Michigan game this season and Saturday's Purdue game, the announced attendances at the four other home games haven't surpassed 96,000, and the actual attendance has likely been less.

A range of reasons

Reasons for the drop-off vary. While Division I universities have seen a subtler decline in attendance that is largely assigned to fans' preference for watching football games on TV, Penn State encounters its own set of problems. Many alumni are angry at the Board of Trustees for its handling of the Sandusky scandal and angry at the athletics department for raising prices through STEP, a seat licensing program enacted in 2011 that has forced season-ticket holders to donate anywhere from $100 to $2,000 per seat.

Individual tickets aren't cheap either. They cost $70 per game, and day-of-game parking costs $40. In 2003, a ticket was $44 and parking $10, according to the Centre Daily Times.

The empty seats are just the beginning for business owners. Ms. Sawhney said the downtown stores and restaurants count not only on the people who attend the games but the rest of their families who often shop around town.

Mr. Losch admits that current crowds still infuse State College with opportunities for commerce, just not at the level the town is used to or what it needs.

"It's not why all these hotels were built," he said. "It's not why all these restaurants are in State College."

In the past, hotels would be sold out at soaring rates several weeks or months in advance of football weekends. This happened for the Michigan game. It hasn't for the other games this season.

There are 28 hotels within five miles of Penn State. For the Purdue game Saturday, only five of them had sold all their rooms for both Friday and Saturday night by the Monday before the game. Two hotels had only one of those nights available. The other 21 hotels had rooms available for both nights.

Bob Spraker, vice president of marketing and sales at Shaner Hotels, said the smaller crowds and the effects of STEP have caused hotels to sell more rooms on a game-by-game basis. In the past, they would often have clients reserve rooms for several weekends per year. He said rates have gone down across the board because of less demand and a greater number of hotels in State College and the surrounding areas.

"Is it doom and gloom? Absolutely not," he said. "It is still a high-demand period for the hospitality and restaurant industries. Football weekends are still big-ticket weekends. Are they a little different than they were a few years ago? Absolutely."

Patty Mandell has managed State College's Comfort Suites for 13 years. For the season opener this year, Ms. Mandell said Comfort Suites had 30-50 percent vacancy, a far cry from most of the past decade when they would book the entire season a year out. She said hotels counted on Penn State for their livelihood, and football weekends were the most important.

"I guess it's the same to us as Black Friday is to any store," Ms. Mandell said. "That gets you through the next year."

Mr. Kifolo, a Penn State graduate, knows this all too well. He opened Happy Valley Freez in fall 2009 and saw increasing profits in 2010 and 2011. In 2012, he said his sales during game weekends dropped by 70 percent. For the Wisconsin game, he said, he lost money by staying open.

Without the extra fall income, Happy Valley Freez struggled through the winter and went out of business at the end of July 2013. Mr. Kifolo remarked on Twitter that he partially blamed the NCAA because of the sanctions against Penn State. He's also weary of the cash-strapped athletic department itself.

"Penn State doesn't care about the downtown business," Mr. Kifolo said. "They just don't. They'd rather keep money on the campus because that's money for them."

George Arnold, executive director of the Downtown State College Improvement District, acknowledged a downturn in business the past two years but said he believes ties between Penn State and downtown merchants are strong. His group is brainstorming ways to bring crowds to downtown for reasons besides football games.

Looking at the long term

Some businesses, particularly the more established ones, have felt less of a pinch and are better able to withstand problems. The Old Main Frame Shop and Gallery's owner, Marie Librizzi, said her store's business has remained steady on football weekends but noticed middle-class families seemed to be spending less in town.

In spite of disappointing football weekends, Mr. Losch said Rapid Transit's consistent shoe sales make up for the decrease. Newer businesses like Mr. Kifolo's Happy Valley Freez or Neebo, a used book and Penn State merchandise store that closed this October, are having more trouble.

Ms. Sawhney, who opened Reflections in 2006, declined to say how much her sales had dropped on football weekends but said, "It's not good. Nobody wants to admit that we are in any way, shape or form suffering."

She said that before the past few years there was a prevailing attitude that Happy Valley was a bubble, resistant to the hard times experienced by other areas of the state. The recent developments have changed her mind. Ms. Sawhney refers to the effects of the Sandusky scandal as the "elephant in the room." She believes State College will rebound economically but doesn't know when.

"One can only hope," she said. "I do think we have to accept we're living under a new normal for a while."

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